Daily Market Update

Quiet Times In FX As Global Risk-Aversion Takes Hold

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The U.S. Dollar is trading in mostly familiar ranges, mostly swinging within 100-point ranges against its European counterparts as well as the British Pound.

Overview

There is no major data out today for the U.S. thus we shall be at the mercy of any headlines regarding trade and political developments, particularly the shutdown.

Chinese trade data disappointed as exports out of the world’s second largest economy fell by 4.4% in December. It is clear that the tit-for-tat tariff conflict is taking its toll and with no details emerging yet from officials, uncertainty over an end to the impasse remains. We shall see if statements from officials make a difference in a week crucial to world trade on many fronts, including what may be a historically significant vote on Brexit tomorrow in the U.K. Parliament. Greenback could see some dramatic swings within the next 48 hours.

What to Watch Today…

EUR

The Euro dwindled slightly based on very poor economic performance being revealed across the region for Q4 of 2018. Spain and Italy joined the bigger economies in seeing contraction in their Industrial Production, by about (-2.6%). Furthermore, there are fears that the economy overall is indeed slowing down and that perhaps it will need help to push the recovery momentum back on down the line.

Over the weekend, a relatively dovish speech from Slovakia’s Finance Minister Jozef Makuch signaled that financial heads in the smaller member nations are worried that the stronger winds of recovery may be behind now and that the global situation merits further monetary protection from the European Central Bank. This of course dampens chances of even considering a rate hike for any time this year. Euro-negative developments indeed, but the shared currency is not sinking yet.

GBP

The Pound may be in for some major movements this week as the Brexit situation finally strikes a key moment: Will Britain have an organized separation from the European Union that will see them establish a new trade arrangement or will we go into darkness about whether Brexit will even happen?

Tomorrow, the members of the legislative branch will decide if this story has more twists or not and the likelihood of chaos is very high. For now Sterling seems steadily rising, but it could easily plummet any second.

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